1. Application for fixing standard rent of a cinematograph theatre under Section 11 of the Saurashtra Rent Control Act. (Para 1 )
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1966 Supreme(SC) 134
SUPREME COURT OF INDIA
K.N. WANCHOO, J.C. SHAH AND S.M. SIKRI, JJ.
Chunilal Vithaldas, Appellant
Versus
Mohanlal Motilal Patel, Respondent.
Civil Appeal No. 427 of 1964, dated 15-4-1966.
Advocates appeared
Mr. Bishap Narain, Senior Advocate, (M/s. J. P. Mehta and S. N. Prasad, Advocates, and M/s. J. B. Dadachanji, O. C. Mathur and Ravinder Narain, Advocates of M/s. J. B. Dadachanji and Co., with him), for Appellant; Mr. R. M. Hazarnavis, Senior Advocate, (M/s. K L. Hathi and Atiqur Rehman, Advocates of M/s. Hathi and Co., with him), for Respondent.
A second appeal under a special statute, unless expressly provided otherwise, remains subject to the restrictions of Section 100 of the Code of Civil Procedure, limiting the High Court's jurisdiction to substantial questions of law and prohibiting the reappraisal of evidence.
Headnote:(A) Saurashtra Rent Control Act, 1951 - Sections 11, 27 and 28 - Code of Civil Procedure, 1908 - Section 100 and Order 41, Rule 11(1) - Second appeal - Scope and restrictions - Whether a second appeal under a special rent control statute is subject to the restrictions imposed by Section 100 of the Code of Civil Procedure - Held: The expression "second appeal" in the special Act does not alter the essential character of a second appeal under the Code; therefore, the High Court's power is limited to substantial questions of law as prescribed under Section 100 of the Code, and reappraisal of evidence is not permissible. (Paras 7-12)
(B) Standard Rent - Determination - Calculation of cost of construction - Miscellaneous expenditures such as tips and distribution of sweets cannot be included in the cost of construction - Valuation of land and building - Where property is purchased to demolish existing structures and erect a new building, the purchase price of land and debris is the relevant basis for cost, not the capitalized value of rent from demolished structures. (Paras 13-15)
(C) Standard Rent - Rate of return - Determination depends on variable factors including normal expected yield in the locality, return from alternative investments, and municipal charges - A gross return of 7% on investment for a cinematograph theatre in the locality may be regarded as adequate. (Para 16)
(D) Standard Rent - Non-delivery of possession - Whether the failure of a landlord to deliver possession of a part of the leased premises affects the determination of standard rent - Held: Enquiry into loss occasioned to the tenant due to non-delivery of possession is foreign to the determination of standard rent. (Para 18)
Facts of the case:
A tenant of a cinematograph theatre applied for the fixation of standard rent, claiming the stipulated rent was excessive. The trial and appellate courts fixed the rent based on a percentage of the cost of construction and furniture. A dispute arose regarding the inclusion of a cellar and a restaurant space in the tenancy and whether the High Court could entertain a second appeal on questions of fact.
Findings of Court:
The High Court was correct in dismissing the second appeal as no substantial question of law arose. The cost of construction was correctly determined by disallowing miscellaneous personal expenses. The 7% rate of return was reasonable. The non-delivery of the restaurant space does not impact the standard rent calculation.
Issues: Whether a second appeal under Section 28 of the Saurashtra Rent Control Act is restricted by Section 100 of the Code of Civil Procedure; and whether the calculation of standard rent and the non-delivery of certain premises were correctly handled by the lower courts.
Ratio Decidendi: A "second appeal" provided for in a special statute, in the absence of express contrary language, retains the characteristics and limitations of a second appeal under the Code of Civil Procedure, meaning it is limited to questions of law. Standard rent is determined by the reasonable return on the actual cost of the property in the specific locality.
Result: Order modified; standard rent of the whole building declared as Rs. 1,200 per mensem, or Rs. 1,100 per mensem if the cellar is excluded from the tenancy.
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2. Whether second appeals under Section 28 of the Act are exempt from Section 100 CPC restrictions and whether the determined standard rent was based on correct valuations. (Para 6 , 7 , 13 , 14 , 16 )
3. The court evaluated the nature of second appeals under special statutes and the factors influencing the determination of a reasonable rate of return for standard rent. (Para 8 , 9 , 13 , 14 , 15 , 16 )
4. A second appeal under Section 28 of the Saurashtra Rent Control Act is subject to the restrictions imposed by Section 100 of the Code of Civil Procedure. (Para 9 , 12 )
5. Standard rent fixed at Rs. 1,200 per mensem, with a conditional reduction if the cellar is excluded from the tenancy. (Para 17 , 19 )
6. Does a second appeal under Section 28 of the Saurashtra Rent Control Act bypass the restrictions of Section 100 of the Code of Civil Procedure?
No. The court held that the essential character of a second appeal is not altered by the Act. It remains subject to Section 100 CPC, meaning the High Court cannot reappraise evidence unless a substantial question of law is involved. (Para 8 , 9 , 12 )
7. How is the value of land treated when determining standard rent if the land was purchased with existing structures that were subsequently demolished?
The purchase price of the land and existing buildings is considered the value of the land and debris. The court rejected capitalizing rent from old structures to determine land value, as land and buildings form a composite unit. (Para 14 )
8. Does the non-delivery of possession of a part of the leased premises impact the determination of standard rent?
No. The court ruled that determining whether a tenant suffered loss due to the landlord's failure to deliver possession of a part of the premises is foreign to the process of determining standard rent. (Para 18 )
Judgment
SHAH, J. : Respondent in this appeal is the owner of a building used as a cinematograph theatre. By a registered deed, dated December 23, 1960, the appellant obtained a lease of the theatre at a monthly rental of Rs. 1,801. The appellant applied under S. 11 of the SAURASHTRA RENT CONTROL ACT 22 of 1951-hereinafter called the Act -for an order fixing the standard rent of the theatre. He submitted that the rent stipulated to be paid under the lease was "excessive, exorbitant and improper" and that the standard rent of the theatre, having regard to its situation and size and the amenities provided therein, could not exceed Rs. 350 per mensem. The respondent by his written statement submitted that the rent stipulated under the lease was reasonable.
2. The Court of First Instance fixed the standard rent of the whole theatre at Rs. 1,030-12-0 being the one-twelfth of the gross return at 6 per cent on the cost of construction of the theatre and the cost of furniture installed therein. But the learned Judge held that the respondent had not delivered to the appellant possession of the basement and of a part of the building which was intended to be used for a restaurant, and on that account reduced the standard rent payable by the appellant by Rs. 220.
3. Against the order of the Civil Judge, the respondent preferred an appeal under S. 28 (1) of the Act to the District Court, Gohilwad, and the appellant preferred cross-objections to the order appealed from. The District Court agreed with the Trial Court that the cost of construction of the building and cost of the furniture was Rs. 2,06,150, and held that standard rent should be fixed on the basis of a return of 7 per cent of the cost of the building and furniture, and on that footing computed the standard rent of Rs. 1,200 Per mensem. The District Court further held that possession of the space reserved for a restaurant was delivered to the appellant and since about June 1952 it was in the appellant s occupation. It was, however, common ground between the parties that possession of the cellar was not delivered by the respondent to the appellant. It was the case of the respondent that the cellar was not included in the premises let out. It was the case of the appellant that it was so included. On the view that the cellar was not included in the tenancy, the District Court directed that standard rent of the premises in the occupation of the appellant be fixed at Rs. 1,150 per mensem.
4. Against the order of the District Court, second appeal No. 552 of 1959 preferred by the appellant to the High Court of Judicature at Bombay was by order, dated March 30, 1959 dismissed under O. 41, R. 11 (1) of the Code of Civil Procedure. The respondent also preferred an appeal to the High Court. For reasons which we are unable to ascertain this appeal was not made ready for hearing before the Bombay High Court and on reorganisation of the State of Bombay that appeal was transferred to the High Court of Gujarat and we were informed at the Bar that the appeal is now pending before that High Court.
5. Against the order of the Bombay High Court dismissing his appeal, the appellant has appealed to this Court.
6. It is somewhat unfortunate that the appeal filed by the respondent has been admitted to the file and is to be heard on the merits, while the appeal filed by the appellant was summarily dismissed. Counsel for the appellant submitted that we should set aside the order of the High Court of Bombay, since a second appeal under S. 28 of the Act lay to the High Court on a question of fact as well as of law, and as there was "voluminous evidence" on the record which had to be considered in determining the appropriate standard rent, the High Court of Bombay committed a grave error in summarily dismissing the appeal. We are unable to agree with that plea.
7. Section 28 (1) of the Act provides :
"Notwithstanding anything contained in any law, but subject to the provisions of the Provincial Small Cause Cou
